Market Summary

Yield Movements

Local currency government (LCY) bond yields in the Republic of Korea fell for all tenors between 2 September and 31 October. Yields fell ahead of the expected monetary policy easing by the United States Federal Reserve at its 17-18 September meeting, when it ultimately cut the federal funds rate by 50 basis points. Moreover, on 11 October, the Bank of Korea cut the base rate by 25 basis points to 3.25% amid stable inflation and a slowdown in household debt growth.

Local Currency Bond Market Size and Issuance

The Republic of Korea's LCY bond market posted marginal growth of 0.01% quarter-on-quarter in the third quarter (Q3) of 2024, reaching a size of KRW3,292.5 trillion at the end of September. The Republic of Korea remained the second-largest LCY bond market in emerging East Asia, comprising almost 10% of the regional bond total. The stock of government bonds was barely changed in Q3 2024 from the previous quarter due to reduced issuance. Meanwhile, corporate bonds rose 0.3% quarter-on-quarter in Q3 2024 as issuance increased.

Sustainable Bond Market

The Republic of Korea had the second-largest sustainable bond market in emerging East Asia at the end of September with outstanding bonds reaching USD182.6 billion on 1.8% quarter-on-quarter growth. Social bonds accounted for 52.3% of the sustainable bond market, of which 70.1% came from the government. Green bonds were the next most common type of sustainable bonds at the end of September with a share of 30.1%, mostly issued by the private sector. Nearly 70% of sustainable bonds outstanding carried maturities of less than 3 years, resulting in an overall size-weighted average tenor of 3.1 years.